As the week begins, financial markets are taking a cautious approach, primed for significant central bank meetings and important macroeconomic data releases. In Europe, attention will be focused on the IFO sentiment indicator from Germany. Concurrently, U.S. investors will be looking to the Chicago Federal Reserve’s National Activity Index and New Home Sales figures for direction and insight.
In the early hours of Monday, the U.S. Dollar (USD) is seeing an upswing amid a risk-averse environment. After a decline of over 1.5% during the previous week, the USD Index is managing to maintain a foothold above 107.50 against other major currencies. Reports suggest U.S. presidential advisors are unlikely to engage in negotiations with Canada or Mexico concerning trade, intending instead to implement 25% tariffs effective February 1.
Technology stocks are experiencing significant pressure in premarket trading, attributed to news that a Chinese AI model, DeepSeek, has surpassed the capabilities of well-known models like Meta’s Llama 3.1, OpenAI’s GPT-4o, and Anthropic’s Claude Sonnet 3.5. Consequently, NASDAQ Futures are down approximately 2.5%, while S&P Futures are also facing losses of around 1.4%. Investors are awaiting the Federal Reserve’s monetary policy announcement scheduled for Wednesday.
In the currency market, EUR/USD enjoyed a rise of more than 2% last week, closing positively for two consecutive periods. However, early Monday saw a slight correction, with trading just above 1.0450. GBP/USD similarly recorded notable gains, climbing about 2.5% last week, yet is currently experiencing modest bearish pressure around the 1.2450 level.
The USD/JPY pair has been stable at around 156.00 following the Bank of Japan’s decision to raise the policy rate by 25 basis points. Despite this move, the Japanese Yen has struggled to gain traction against other major currencies. In commodity markets, gold reached above $2,780 on Friday, nearing a new record high, but opened slightly lower this week while remaining above the $2,750 level.
